Oil price plummets by two percent to 12-week low fuelling global recession fears

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The previous struggles with the price of oil are culminating in all too regular long-term dips which are impacting the actions of investors. Investors are increasingly concerned about an increased demand in energy being hit by a global recession as inflation and the cost of living continues to soar.

According to analysts who were polled by Reuters, they predicted that US crude inventories fell by approximately 1.0 million barrels last week and a reduction in crude stockpiles may support prices.

The industry group The American Petroleum Institute (API) is due to issue an inventory report at 4:30 PM EDT (8:30 PM GMT) on Wednesday.

Meanwhile, the US Energy Information Administration (EIA) is due to give its report at 11:00 AM EDT (3:00 PM GMT) on Thursday.

The reports from both companies have been delayed by a day due to the celebration of Independence Day on July 4.

Brent futures for September delivery fell by 2.0 percent or $2.08 (£1.74) to $100.69 (£84.27) per barrel.

Meanwhile, West Texas Intermediate crude fell by one percent which is equivalent to $0.97 (£0.81) to $98.53 (£82.47).

Both crude benchmarks closed at their lowest since April 11 in what is officially oversold territory for a second day running.

US diesel futures also plummeted by over five percent.

With crude futures having been highly unpredictable and unstable for months, trade continues to be volatile.

Investment bank analysts from Goldman Sachs and UBS have concluded that recession fears are fuelling the oil price drop.

UBS said that reasons include “the unwinding of the oil trade as inflation hedge, a stronger US dollar, hedge funds reacting to negative oil price momentum, producer hedging and new mobility restriction concerns in China”.

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Robert Yawger, the executive director of energy futures at Mizuho said: “There are undeniably concerns about recessionary demand destruction, plus, WTI open interest at multi-year lows have created a bit of a liquidity crunch.”

The head of the International Monetary Fund has not given cause for hope as she said that the forecast for the global economy has “darkened significantly” since April.

She added that she would not rule out the possibility of a global recession next year.

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